Dynamic pricing in airline revenue management

Selcuk A. M., AVŞAR Z. M.

JOURNAL OF MATHEMATICAL ANALYSIS AND APPLICATIONS, cilt.478, sa.2, ss.1191-1217, 2019 (SCI-Expanded) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 478 Sayı: 2
  • Basım Tarihi: 2019
  • Doi Numarası: 10.1016/j.jmaa.2019.06.012
  • Dergi Adı: JOURNAL OF MATHEMATICAL ANALYSIS AND APPLICATIONS
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Sayfa Sayıları: ss.1191-1217
  • Anahtar Kelimeler: Revenue management, Dynamic pricing, Time-variant demand, Customer behavior, Demand uncertainty
  • Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

In this study, an exact Dynamic Programming formulation is developed for price based revenue management in the airline industry. Structural properties of the optimal pricing policy are presented first. Then, the optimal policy is investigated for four different price-demand relationships and the characteristic properties of the airline demand are discussed. Performance of the proposed Dynamic Programming formulation is numerically compared with an alternative approximate approach based on the repeated use of a Mixed Integer Programming model and also with intuitive methods of temporal price discrimination. The numerical results show that significant revenue improvements are obtained by the proposed dynamic pricing methodology. (C) 2019 Elsevier Inc. All rights reserved.